Many organizations in the 21st century are realizing that the traditional pyramid organization structure is holding them back, it was first conceived over 200 years ago for a very different age, it was designed to control manufacturing process, not support service process. These organizations are understanding that no matter what industry you are in, you fall into one of three categories. You are either a customer an employee or a support employee. These companies are striving to align all tasks and activities towards the delivery of Successful Customer Outcomes, therefore if you are an employee, no matter where you are in the business, your job is the same as all other employees: to deliver Successful Customer Outcomes.

The more advanced companies in the 21st century, rather that organizing by department, are organizing by outcome and creating teams with different specialisms to work together to better serve thier customers. You need to ask the question however, in this new world with only 3 categories in business, customer, employee or support employee, where does the CEO fit? Well, the CEO now becomes a support employee, there to make everyone else's work run as smoothly as possible. All of a sudden the CEO finds them self at the bottom of the pack, less important than the customer facing staff who are delivering the organization's customer experience day in day out, the most important part of any business.

Because of this, some CEO's are now extracting them self from the process as they can clearly see that in the new advanced world they are not contributing very much if anything towards customer success. Some are being extracted against their will. Really ask your self the question and answer as honestly as you can "How much is my CEO contributing to customer success?" and you will see the rationale behind this monumental shift in mindsets.

The main challenges are from people who quickly get exposed as redundant in terms of delivering customer success, turkey's don't vote for thanksgiving. Systems and procedures are also a challenge to traverse because they have all been created to work within traditional Industrial Age structures and struggle to cope with this new radical way of working.

The main benefit is the empowerment of employees to make decisions on behalf of the organization making process far faster and smoother than having to navigate the traditional hierarchical control structures. Competitors trying to keep up with this level of service are failing because they cannot deliver process as quickly or a successfully as these companies who have organized them selves for success.

The latest Amazon announcement and subsequent response articles got me thinking about human psychology and it's influence over innovation.When it comes to innovation there are really only two types of personality. I refer to this as the 2 P's.

One P stands for 'Possibilities', they are people who when they hear or think of an innovative idea they think 'Wow! Think of all of the possibilities'.

The other P stands for 'Problems', they are the people who in the same situation will think 'Whoa! Think of all of the problems'.

You are either a 'Possibility P' or a 'Problem P'.

Both are important to have with innovation, if the world had all Possibility P's we'd have loads of forward thinking ideas that might not have been practically thought out yet. If the world had all Problem P's we'd have a lot of very tame yet well thought out ideas. Neither situation is ideal.

Each personality type has good points and bad points. Problem P's seem scared to move forward and try anything new where as Possibility P's seem scared to stay the same for more than 10 minuets. Possibility P's will air ideas that could change the world with the risk of embarrassment where as Problem P's may think up the same idea but because there has not been time for detailed risk assessment or logical deductive reasoning and there may be a multitude of things that could go wrong they will keep it to themselves. We all have the capacity to innovate but we have have different capacities of what we allow ourself to do with those ideas.

We all like to think we are a Possibility P but we aren't. The truth is that there is more Problem P's than Possibility P's out there. When looking at innovation it's best to have a good mix of the the two.

Imagine two groups trying to innovate the cell phone. Group one is made up of all Possibility P's and group two is made up of all Problem P's.

Group one may think up a revolutionary idea where we now all have the device implanted in our heads and we just have to think of a contact to dial them. In principal a very forward thinking innovative idea but in practice may not be practical for this day and age and may have a whole host of health and privacy issues attached.

Group two may come up with an idea about how to upgrade the components in a cell phone to make it run faster and more efficiently with less error risk and increased functionality. In it self a very practical well thought out logical idea but in the real life isn't going to make any waves.

Imagine a group with equal numbers of the two P's, together they might create the iPhone.

Some times the two P's will lock horns. Problem P's think the other guys are non logical people with their head so far in the clouds they can't see the detail any more. Possibility P's think the other guys are negative people who are just there to clip their wings and who aren't capable of creativity. In some extreme cases this is true. Some Possibility P's will come up with ideas so ludicrous that it's barley worth listening to their input and some Problem P's will disagree with everything and be a real ball and chain just for the sake of it or because they are unable to understand and nurture creative thinking.

The point of all of this is to recognise what type of people we are working with and embrace their talent whether it be divergent thinking or deductive reasoning.

Problem P's help the others get their ideas into practical application where as Possibility P's help the others express their inner innovator.

Possibility P's are helping the world evolve at the fastest pace in history and Problem P's are making sure this isn't causing chaos. Both are just as important as each other, what are you?

The next time you hear an innovative idea, check yourself, do you immediately think 'Wow! Think of all of the possibilities' or 'Whoa! Think of all of the problems'? No matter what the answer harness the power of your P, share it, embrace it and most importantly accept it.

American Airlines recently announced a brand makeover, releasing its new logo and designs for its planes. According to CEO Tom Horton: “Our new logo and the refreshed exterior of our planes represent more than a change of symbol, but a symbol of change in our path to modernize and innovate“My take: The company spent millions of dollars on this veneer, but has yet to address its bigger brand issue: Customer experience. The airline can make whatever promises that it wants in its visual identity, but the lasting impressions of its brand are formed by the millions of interactions that customers have with American Airlines every day, whether it’s online, on the phone, at the airport, or in the air. Brands are formed not by the promises we make, but by the promises we keep. To put American’s customer experience into perspective, it was the next to worst airline in the 2012 Tempkin Experience Rating (only slightly ahead of US Airways, the airline that it is planning to merge with) and rated 187th out of 206 organizations in the ratings. Making matters even worse, it was one of the few companies to show a decline from 2011 to 2012. While we won’t be releasing the 2013 Temkin Experience Ratings for a couple of weeks, I can tell you that American Airlines and US Airways have successfully defended their bottom spots in the airline industry. Where should American Airlines focus its energy, if not a new logo and some fancy paint on the tail of its planes? Employees. One of the Six Laws of Customer Experience is that unengaged employees don’t create engaged customers. Until American finds a way to get employees on-board, then it will continue to deliver terrible experiences to customers. And there’s no amount of marketing and advertising spending that can make up for a bad experience. As a vision of what might be possible in the long-term future, take a look at what Southwest Airlines does with employees. With that in mind, Horton and the rest of the American Airlines management team should immediately start focusing on what we call the Five Is of Employee Engagement: Inform, Inspire, Instruct, Involve, and Incent. As a frequent flyer, I hope that American Airlines figures this out. An upcoming merger with US Airways will hopefully become a catalyst for making signifiant improvements in employee engagement (and ultimately customer experience). If not, this might just be a case of the bad getting bigger.

American Airlines and US Airways formally announced their merger. According to the 2012 Tempkin Ratings, they are the two worst U.S. airlines in customer experience. US Airways actually holds the bottom spot in our experience, loyalty, forgiveness, and trust ratings. By contrast, the recent merger between Southwest Airlines and AirTran represents a combination of the two top airlines in customer experience.

Does this mean that the merger will create a mega-monster in terms of customer experience? Hopefully not. But I recommend that every member of the newly combined management team focus on all four customer experience core competencies.

Purposeful Leadership

Compelling Brand Values

Employee Engagement

Customer Connectedness

The bottom line: There’s a lot of work ahead for American Airlines and US Airways

It’s hard to discuss employee engagement without mentioning Southwest Airlines. Here’s how Southwest’s founder and former CEO Herb Kelleher once described his approach to management: “

If you create an environment where the people truly participate, you don’t need control. They know what needs to be done and they do it. And the more that people will devote themselves to your cause on a voluntary basis, a willing basis, the fewer hierarchies and control mechanisms you need.” That’s not just an empty observation; it defines how Southwest Airlines has been built. I recently heard a presentation from Southwest and wanted to share some of the more interesting tidbits.

80% of Southwest’s employees are unionized, the largest of any airline.My take: That’s interesting, and provides a clear example that companies can engage unionized employees. It really hit home to me when I saw this great note from the pilot’s union to Kelleher when he retired.

Each workgroup at Southwest is the highest paid in the industry.My take: The company can afford to do this because it takes advantage of what we call the Employee Engagement Virtuous Cycle. It turns out that companies with above average financial results tend to also have more engaged employees.

After 9/11, Southwest was the only airline not to lay off people.My take: It actually sold off some planes instead. It’s easy to focus on employee engagement when things are going well, but the real demonstration of commitment comes when people are forced to make difficult trade-offs.

To help keep the airline viable when gas prices spiked in 1991, employees voluntarily purchased fuel for the company via payroll deductions.My take: Employees that are treated as important participants in the business will go out of their way to help the company. Our analysis shows that employees who are inspired by their company’s mission are more likely to go out of their way to help.

In May 1972, the company created the 10-minute plane turnaround.My take: This innovation was the response to a desperate situation where the company wanted to keep servicing the same number of routes although it had to cut back on the number of its planes. This critical innovation could never have been done by mandate, it took the full participation and involvement of Southwest’s employees.

The company describes itself as having a servant’s head, a warrior’s spirit, and a fun LUVing attitude.My take: I really like this description. The head is about living the golden rule, the spirit is about doing whatever it takes, and the attitude is a play off of the company’s pervasive use of the term LUV, which is its stock ticker symbol as well. Southwest employees take their work seriously, but not themselves.

If it can be done, I’ll do it.My take: That’s the positive attitude that Southwest employees are taught to have with customers. It’s a stark contrast to the “can’t do” attitude that shows up with employees at many other companies. That’s why Southwest is the easiest airline to do business with in the 2012 Temkin Experience Ratings. Interestingly, number two on the list is AirTran, the airline acquired by Southwest.

We make deposits in the goodwill bank.My take: That’s another phrase I LUV. Everyone makes mistakes, but companies that build goodwill are often given a second (and third, fourth, fifth, etc.) chance. Southwest can count on a relatively high degree of goodwill, given it was right behind JetBlue in the 2012 Temkin Forgiveness Ratings.

When collecting baggage in Brasilia airport, huge windows allow you to see what is going on outside. You can see the aircraft you just disembarked from, and the progress of your bags from plane to baggage belt. Waiting you may be, but no waiting and wondering.Too many companies hide their processes from their customers. For example, Walgreens lock their toothbrushes in a cabinet and provide a button to press so that an employee can come unlock it and you can grab what you want. The problem (apart from the fact that they lock up their toothbrushes) is that when I pressed the button, nothing happened. I waited and waited. I pressed the button again. What was going on? What did the button do? Did it ring a bell? Ring someone’s phone? Turn a light on somewhere? Did anyone hear the bell? See the light? Does the button even work? So I left and bought my toothbrush somewhere else. Exposing processes to customers is good. It helps set expectations around what is happening, and when things are not happening as expected, why that might be. And it means that customers might stick around rather than leave. Article by Paul Adams @ www.thinkoutsidein.com

There are some people out there who know this, e.g. Apple, Google, IBM, McDonalds, Coca Cola, AT&T, Marlboro, China Mobile, Disney, Microsoft are starting to see the light too. In fact in 2011, 8 out of the 10 world leading companies are classed as Outside-In, Microsoft have a mixed model so we don’t count them but if we did it would be 9 out of 10. You would think that more people would take notice of this. The problem is there are some people who have made very successful careers on this old industrial age thinking and therefore are not willing to accept that everything has changed and they need to as well. Funny thing is, they will have to change sooner or later, it’s their choice how they change however.

A) Go Outside-In. B) Go Bust.

Don’t get hung up on the name ‘Outside-In’ lots of people call it different things, and it’s not the name that’s important, it’s the philosophy behind it.

How are they doing this?

So what do these guys know that I don’t? Let’s look at a few key points to start thinking Outside-In and actually drive significant business improvement even when you have already optimised using traditional techniques. 1) Everything is process. There is not a single thing that happens in a company that is not process. ‘I’m in Marketing, I don’t do process’ that’s a process. ‘I’m in Finance, I don’t do process’ It’s all process and the faster you realise this, the better. 2) The Customer Experience is the Process. Forget about departments, forget about functional specialist silos, when looking at process, treat the customer experience as the process, also redefine where the process starts and finishes, this gives you a whole load more scope than before and opens you up to a whole new world of opportunities. 3) Align all Process to a Successful Customer Outcome (SCO). If you are doing something that does not contribute to customer success most of the time there is no need to be doing it. Figure out what the customer need it and align to this. You will find there are big chunks of process that will disappear overnight. 4) Drive out Points of failure. 'Moments of Truth' happen whenever there is a customer interaction, the less of these the better, they cause work and are the places where things can go wrong, figure out how to ‘Remove or Improve’ these. 'Break Points' are the internal handoffs and interactions, again these cause more work and can start to mess up what’s going on, if the internal work isn’t directly contributing to the SCO get rid of it, why do it? 'Business rules' are the rules that have been put in place to make sure you keep things as they are these usually cause a lot of the internal handoffs and customer interactions and most of the time there is no need for them to be there, ask yourself ‘Why do I have to do it this way?’ and if there isn’t a good enough reason to back up the rule, chuck it out!

Looking at things in a different way completely changes how we do business, driving out Points of Failure improves customer experience, and reduces cost, this paired with looking at the customer experience at the process (that gives you more opportunity to make money) will grow your revenue. Achieving these three things simultaneously is known as the Triple Crown and only Outside-in companies can do this because the old Industrial age way of thinking only moves the pain about and improving one (Revenue, Cost or Experience) will directly affect the others in a detrimental way.

Innovation by DesignIn conclusion, thinking this way makes innovation a natural by-product and having an Outside-in company with every one knowing these techniques and philosophy is the only way to foster a culture of innovation throughout a whole organisation. So how do you drive significant business improvement when you have already optimised using traditional techniques? Dump the traditional industrial age ‘classical’ thinking techniques and think Outside-In.

There has been a seismic shift in the world and it has changed beyond belief since 1776: The way we communicate, the way we make music, the way we make television and films, the way we travel, the places we can travel to and technology has changed with this to keep up with our ever evolving demands. The one thing that hasn’t changed is how we do process and how we organize our business. Now I can hear some of you scoffing and remarking ‘Er, yes we have changed how we do process, look at TQM, BPI, BPR, Six Sigma, Lean, BPM…you’re talking rubbish James’ and where as I agree we have changed techniques around process, we have not changed the foundation that they were based on.

It’s like we have had a house for a very long time and wekeep having more and more kids. We expect the house to be able to handle thisso to make living conditions better we decide to keep paining the wallsdifferent colours and saying ‘Look guys, its completely different.’ We need tofundamentally evolve how we think to keep up with the massive change that’shappened and wake up to the fact that everything has changed except how to doprocess and organise ourselves.

Lean, Six Sigma and the Glass Ceiling

Now let’s look at the traditional ways to drive business improvement. Six Sigma was all the rage and still is the ‘only way to go’ for some process professionals, especially after Jack Welch’s success using this at GE. The thing is, if a big company is in a big mess then Six Sigma will make things look better. It may seem like there has been significant improvement however you will tend to find that the technique will have been applied to one process, or a process in one area and rather than fixing the cause of the problem it will fix the effect. If you fix an effect it will only happen again or move the pain elsewhere as the cause is very much still there. Also listening to ‘The Voice of the Customer’ is a waste of time, we don’t need to provide what they want, we need to provide what they need. We as customers are inept at conveying what we need, it just doesn’t happen. For example I didn’t know I needed an iPhone or an iPad before they were invented…I very much need them now. The easiest way to think about it is if you ask a child what they ‘want’ to eat, imagine the responses you will get. Rather than doing that we figure out what they ‘need’ to eat and provide that, however we don’t translate this ‘want vs. need’ thinking to business. GE’s inside-out thinking is causing them to be overtaken by the smarter Outside-In companies as are Toyota, Toyota in fact have moved from 14th in the world down to 27th in the world in brand value[i] but apparently that doesn’t matter let’s still use their techniques, that’s a smart idea. If we look at Lean we talk about ‘waste’ and how to eliminate it. This is still very much industrial age or ‘classical’thinking. If I was making a table in a factory there would physically be‘waste’ wood to eliminate however in a service, for instance a Mortgage application, the ‘waste’ that is talked about does not physically exist so we are focusing our efforts on an imaginary entity applying manufacturing process techniques to a service company. Ask yourselves now, How much of my work is manufacture? Why do I think about it all‘left to right’ like a production line? Using these techniques you will get improvements, definitely, no doubt whatsoever. However using these techniques you will quickly hit a glass ceiling where you can go no further, definitely, no doubt whatsoever. This is all Inside-Out thinking. There’s every chance you are optimising a process that doesn’t need to be there. You might be doing things right…but are you doing the right things?Part 3 Soon...[i]Millward-Brown Optimor Annual Brand Survey 2011

Let me set the scene and take you back to the year 1776 and a small Pin Factory in Scotland and a man you will most likely have heard of: Adam Smith. Adam Smith was a social philosopher and a pioneer of political economy and on the 9th of March, 1776 published the book that has formed how we do business to this day ‘The Wealth of Nations’roughly 4 months before Mozart’s first ever performance of the Haffner Symphony. Adam Smith had gone into this Scottish pin factory and noticed some extraordinary things, one being that the pin factory’s productivity was largely dependent on what employee was in work on any given day. Smith looked deeper into the workings of the pin factory and created what is described as the ‘division of labour’ (and later the subdivision of labour) where individual tasks were clearly defined and each person was assigned and trained up to effectively complete their task. This revolutionized manufacture and production, he increased productivity by 2400% and his book was mentioned in the declaration of independence.

The Effect

Most of us in business now still follow what was published in ‘The Wealth of Nations’ in 1776. If you think about your organisational structure, what shape are you in? A pyramid, where the CEO is at the top and it rolls down to the guys at the front line, or in the trenches (It’s not a war by the way) This pyramid shape doesn’t physically exist it is an abstract illusion, it is however an abstract illusion that shapes and forms how we do work. Have you ever stopped to wonder where the customer is in your organisational structure? If the customer gets a mention at all they are usually shoved off to the sides and this again creates its own problems, ‘Hey! I’m in operations, look at the chart, the customer is 8 steps away from me in my value chain, I don’t deal with the customer’ The only reason that Mr Operations thinks that he doesn’t deal with the customer is because of the collective abstract illusion created by industrial age thinking being applied in today’s vastly different world. Earlier I mentioned that ‘The Wealth of Nations’ was published 4 months before Mozarts first performance of the Haffner Symphony, look at the comparison. We consider Mozart to be ‘classical’ music but do we consider the ideas born of a Scottish pin factory by Adam Smith in 1776 ‘classical’ thinking? No, not many of us do, and not many of us will for a long time. Put it this way some people didn’t accept that we lived in a Heliocentric universe (the sun being center of our solar system) until 1998.Part 2 soon...

What is the difference between an influencer and an advocate for a brand? A lot of people recommend that a brand practice “influencer outreach”; others suggest a brand advocacy program is paramount for an organization. In his recent book, Smart Business, Social Business, Michael Brito discusses these two important points. Michael and I shared the stage recently at the Lithium Technologies “Likes to Loves” event in Orange County, CA, and I had the opportunity to interview him briefly on this very topic. What do you do at your organization? Do you reach out to influencers in an effort to get them to share about your brand? Do you work with your brand advocates to help energize their natural passion for your brand? What is working for you?

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